Are You Ready for Therapy Caps?

on Wednesday, 22 August 2012. All News Items | Outpatient Services | Billing

For the first time, beginning with dates of service October 1, 2012 through December 31, 2012, therapy caps apply to patients treated in a hospital outpatient setting. Also, for the same time frame, CMS will be implementing automatic manual review of therapy services exceeding a set threshold.

Are you aware of the new regulations; do you understand them and is your hospital ready for therapy caps and thresholds?

What is the therapy cap?

The therapy cap is a financial limitation on the amount Medicare will pay for therapy services for an individual patient in any given calendar year. Medicare allowable charges, which include both Medicare payments to providers and beneficiary coinsurance, are counted toward the therapy cap. The therapy cap for 2012 is $1880 for occupational therapy (OT) and $1880 for physical therapy (PT) and speech language pathology (SLP) therapy combined. There is an exception process for medically necessary therapy services above the cap, which is explained below.

What has changed?

Previously the therapy cap did not apply to hospital outpatient therapy services, but as stated above, beginning October 1, 2012 through December 31, 2012, it will. Also beginning October 1, 2012, Medicare payment amounts for all therapy services provided in hospital outpatient departments from January 1, 2012 through September 30, 2012 will be included in patients’ total therapy amounts for 2012.

CMS will also implement an automatic manual review of therapy services that exceed a threshold of $3,700. Just like the therapy caps, there is one $3,700 threshold for occupational therapy and another $3,700 threshold for physical therapy and speech therapy services combined. As described below, CMS will allow providers to request a pre-approval exception from the automatic manual review.

How do you know how much therapy the patient has received so far?

Providers can use the Medicare ELGA or HIPAA Eligibility Transaction System (HETS) to determine the dollar amount of therapy the patient has had so far for 2012. Remember that prior to October 1, 2012, the amount shown does not include therapy performed in a hospital outpatient setting, but beginning October 1st, that amount for all of 2012 will be included.

Once I know the patient’s amount, what do I have to do?

It depends on where the patient is in his or her Medicare therapy spending for the year. Let’s consider each scenario separately.

Less than the therapy cap of $1,880
If your patient is far enough below the therapy cap amount of $1,880 that the services for which you will be billing will not push him/her above the cap, then you continue to provide services, document, and bill as you are currently doing. Remember, therapy furnished by providers must always be reasonable and medically necessary, require the specialized skills of medical professional, and be justified by supporting documentation in the patient’s medical record.

Nearing or above the therapy cap of $1,880 but less than threshold of $3,700
If your patient is above the $1,880 cap for the discipline(s) you are providing or the services you will be billing will put the patient above that cap, but below the $3,700 threshold, then you can request an exception by appending the KX modifier to the therapy services. The KX modifier is only to be used for therapy services that are reasonable and medically necessary, require the specialized skills of a therapist, and are justified by supporting documentation in the patient’s medical record.

Providers should refer to the Medicare Claims Processing Manual, Chapter 5, sections 10.3-10.5 for complete information concerning the automatic exceptions process to exceed the therapy cap. Some of the key points from the manual are:

  • Medicare will make exceptions from the therapy caps for therapy evaluations (CPT codes 92506, 92597, 92607, 92608, 92610, 92611, 92612, 92614, 92616, 96105, 97001, 97002, 97003, 97004) when evaluation is necessary, e.g., to determine if the current status of the beneficiary requires therapy services.
  • An exception may be made when the patient’s condition is justified by documentation indicating that the beneficiary requires continued skilled therapy, i.e., therapy beyond the amount payable under the therapy cap, to achieve their prior functional status or maximum expected functional status within a reasonable amount of time.
  • Clinicians may utilize the automatic process for exception for any diagnosis or condition for which they can justify services exceeding the cap. Regardless of the diagnosis or condition, the patient must also meet other requirements for coverage.
  • The condition or complexity that caused treatment to exceed caps must be related to the therapy goals and must either be the condition that is being treated or a complexity that directly and significantly impacts the rate of recovery of the condition being treated such that it is appropriate to exceed the caps. Documentation for an exception should indicate how the complexity (or combination of complexities) directly and significantly affects treatment for a therapy condition.
  • Factors that influence the need for treatment beyond the cap should be supportable by published research, clinical guidelines from professional sources, and/or clinical or common sense.
  • The KX modifier, is added to claim lines to indicate that the clinician attests that services billed 1) are reasonable and necessary services that require the skills of a therapist; and 2) are justified by appropriate documentation in the medical record; and 3) qualify for an exception using the automatic process for exception.
  • When the cap is exceeded by at least one line on the claim, use the KX modifier on all of the lines on that institutional claim that refer to the same therapy cap (PT/SLP or OT), regardless of whether the other services exceed the cap.
  • In addition to the KX modifier, the GN, GP and GO modifiers and any other applicable modifiers shall continue to be used. Providers may report the modifiers on claims in any order.
  • No special documentation is submitted to the contractor for automatic process exceptions.
  • Use of the automatic process for exception does not exempt services from manual or other medical review processes.
  • It is very important to recognize that most conditions would not ordinarily result in services exceeding the cap. Use the KX modifier only in cases where the condition of the individual patient is such that services are APPROPRIATELY provided in an episode that exceeds the cap. Routine use of the KX modifier for all patients with these conditions will likely show up on data analysis as aberrant and invite inquiry. Be sure that documentation is sufficiently detailed to support the use of the modifier.
  • If the attestation is determined to be inaccurate, the provider/supplier is subject to sanctions resulting from providing inaccurate information on a claim.
  • If a claim is submitted without KX modifiers and the cap is exceeded, those services will be denied.

Notifying the Medicare Beneficiary about the Therapy Cap

Since the therapy financial limitation is a statutory limitation, the patient (Medicare beneficiary) is financially liable for payment of therapy services that exceed the therapy cap that do not meet an exception. Medicare advises providers to notify beneficiaries of the therapy financial limitations at their first therapy encounter with the beneficiary. Since the therapy cap has not previously applied to hospital outpatient services, but will beginning October 1, 2012, hospital therapy departments may want to notify their Medicare patients expected to be receiving services beyond that date of the therapy financial limitations soon. Providers can use an Advance Beneficiary Notice (ABN) as a general notification to patients about the cap. And although not required to assign financial liability to the patient, the ABN can also be used for patients wanting to continue therapy that does not meet the exceptions process beyond the cap.

Nearing or above the therapy threshold of $3,700
Your patient is above the $3,700 threshold for the discipline(s) you are providing or the services you will be billing will put the patient above that threshold. This threshold triggers automatic manual review, but CMS is implementing a phase-in for the manual review and a pre-approved exception process.

Providers will be divided into three Phases. Providers will be notified via US Mail before September 1, 2012 about the process to request an exception to the threshold and which Phase the provider is assigned. According to the CMS Special Open Door Forum on the manual review process for therapy services, a list of providers and their phases will also be posted on the CMS therapy website. So providers will not have to worry about the therapy threshold until the beginning date of their Phase. The phases are as follows:

  • Phase I Oct 1, 2012 to December 31, 2012
  • Phase II Nov 1, 2012 to December 31, 2012
  • Phase III Dec 1, 2012 to December 31, 2012

Once a provider’s phase starts, they will be required to submit requests for exceptions to the threshold in advance of furnishing therapy services above the threshold. Each MAC will have detailed instructions posted to their websites on how to submit a request for an exception to the threshold before September 1, 2012. Refer to the resources below for more information and watch for additional information to come soon, but key points from the information already available are:

  • Requests for exceptions will be manually medically reviewed. Providers will have to submit documentation to support their requests, such as orders, plan of
    care, and any other supporting documentation.
  • Requests for exceptions can be made in increments of 20 treatment days.
  • Contractors will have 10 business days to review the request for exception to the threshold using the manual medical review process. The 10-day timeframe starts when the contractor has obtained all necessary documentation from the provider. If a contractor fails to make a decision within 10 business days of receiving a request containing all the required documentation the request will be automatically approved.
  • Claims received for therapy services above the threshold which have not been approved for a provider assigned within a specific phase, shall be subject to prepayment review upon receipt for payment.
  • Prior to the start date of your facility’s phase, you may continue to use the automatic exception process (KX modifier) for therapy services above the cap and threshold amounts that are medically necessary and meet the necessity and documentation requirements.

Obviously this is a complex and evolving process. This article attempts to include the major points facilities need to consider in their preparations for the new rules, but all details are important. Therefore, we strongly encourage those affected by the new rules to review all of CMS’s information found at the links below.


Medicare Therapy Billing Webpage

Medicare Claims Processing Manual, Chapter 5 (section 10)

Medicare Benefits Policy Manual, Chapter 15 (sections 220 and 230)

Medicare Therapy Cap Fact Sheet

Special ODF Therapy Manual Review Tanscript

Therapy Manual Review Q&As

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